Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart
The annual holiday-spending frenzy is about to kick off, and if a consumer survey released on Monday is any indication, it will feature a lot more debit card and cash usage and a lot less mobile payment than you might have expected.
Some 39% of consumers intend to use cash most often this holiday season, while 31% indicated debit card, according to a survey of 1,000 consumers conducted earlier this month by New York City-based Bankrate Inc. Throw in a modest 3% designating check, and fully 73% plan to use a cash-based payment method between now and Christmas. Just 22% said they’d use a credit card most often (1% said “other” and 3% didn’t know).
That result could throw cold water on many merchants’ sales projections for the season, since a heavy reliance on cash and debit cards would crimp the open-to-buy potential offered by credit. Certainly, the numbers stunned the folks at Bankrate. “That was the headline surprise for us,” analyst Mike Cetera tells Digital Transactions News.
Of course, it’s possible people fudged their intentions somewhat, fearing that expressing a preference for credit might have made them seem imprudent. “There’s this possible disconnect,” Cetera says, between what people say they’ll do and what they actually do. “It remains to be seen what the reality is,” he adds.
That’s borne out by historical reality. Looking at fourth-quarter data for Visa Inc. and MasterCard Inc. since 2010, credit card transactions have grown about 9% per year on average, compared with 6% for debit. Granted, throughout this period, the volume of debit transactions in the holiday quarter was about double that of credit. Also, early in that four-year period, Visa lost significant debit volume because of routing rules prescribed by the Durbin Amendment—though MasterCard gained debit traffic for the same reason.
The preference for debit is strongest—and weakest for credit—among those aged 18-29, according to the Bankrate survey. Here, 48% say they’ll use a debit card most often for holiday shopping, compared with just 14% preferring a credit card. By comparison, the next oldest age group, those 30-49, is nearly equal in its card preferences, with 28% citing debit cards and 24% credit cards.
Bankrate also asked about point-of-sale mobile payments, and here the sentiment was notably tepid. Among the 70% of surveyed consumers who have Internet access on their phones, 84% said they have no plans to use a mobile wallet in stores. Some 14% said they do. The rest didn’t know, didn’t have a wallet on their phone, or didn’t plan to do holiday shopping.
The most often cited reasons for not planning to use mobile payments were fears about security (36%) and a feeling other methods are more convenient (31%). The unease about security comes despite widespread availability of tokenization for card credentials and biometric authentication. “It demonstrates there’s an education gap,” says Cetera. “There’s also fear of the unknown. If you’ve never made a mobile payment, what happens to your data at the point of sale is a valid concern.”
Education may overcome the security concern, but the convenience factor, Cetera warns, is a longer-term problem for mobile wallets. “It’s just as easy for me to take my credit card out as to take my phone out,” he notes. So mobile-payments services need to offer substantial consumer incentives to induce usage, at least in the early going, he says.
Still, the convenience gap may narrow as EMV chip cards proliferate and consumers discover how much dipping their cards in an EMV reader stretches out transaction times. “I’ve been frustrated with how EMV payment works,” Cetera says.
